Shared Risk Takes Center Stage In Federal Policy, Channel Sales

Now more than ever, solution providers and their vendors need to work together to bring product-focused solutions to their government partners. With this four-part series, Liesegang, vice president of the government channels division of immixGroup, looks at how new realities in policy are driving federal business and how that affects government missions and technology.—Jennifer Bosavage, editor

Federal channel players, and manufacturers—especially smaller companies just getting started in the government channel—don't routinely keep a keen eye on federal policy. When selling to the government, they're usually looking at how to bring technology into the federal government with go-to-market strategies that are product-focused, rather than solution-focused.

In the changing federal procurement environment, that’s no longer the best strategy. The federal government is enacting new policies that will require systems integrators and prime contractors to assume much greater risk in satisfying contract awards when selling to the government. Firm fixed-price contracts and contractor accountability will be the focus for how companies interact with the government and fulfill the contracts they’ve won.

Here's a quick overview of the federal policy landscape. Here’s what’s happening:

Quality accountability: Look for more open-ended liability demands on contractors. For example, a new type of clause has entered into government contract awards. Called “Contractor Accountability for Quality,” the provision lets the agency cut or withhold fee payments if the contractor uses bad parts or fails to use best practices.

With that open-ended liability, contractors will want to see accountability trickling all the way down to the people who provide the component parts for contract awards. VARs may become less inclined to use a “white box” solution, because they don’t fully understand the sourcing of all the components. They may instead choose to stick with more mainstream solution, where the supply chain is clearer.

What does that mean for you? Secure the supply chain. You’ll need to understand your complete supply chain like never before. Make sure that your processes – from manufacturing of parts to the government end user – are streamlined. Know all the players, and ensure that they are reputable.

Firm, fixed-price contracts: The Federal Acquisition Reform (FAR) Council, working under guidance from the Office of Federal Procurement Policy, is calling for contracts that require the contractor to deliver commercial services fully to the government’s satisfaction in any contract award. It’s all about teamwork here. Especially on the firm-fixed price portions of government contracts, integrators and VARs will want to build a team of subcontractors that will entertain shared risk, have solutions to mitigate that risk, and can move forward as a fully invested team player.

Best practices in interagency procurement: The FAR Council is now requiring written justification and determination that the contracting vehicle for any given interagency contract is the “best procurement approach” of all possible options.

Selling into the federal government today means having much greater awareness of how the procurement process works, to make certain that you are working with partners who fully understand the process. You don’t want to be mired in countless revisions to proposals—or worse yet, lose out on proposals because your upstream partners may not have a full grasp of what's needed to win.

In today's policy environment, shared responsibility is true not only for contractors but also for subcontractors. Whether working with systems integrators as end users of a product or through systems integrators purchasing solutions on behalf of a government agency, these policy changes will have an impact in areas of cost and accountability overall. Because systems integrators, VARs and prime contractors have to look at policy more closely than ever, they’ll need to work with channel partners to ensure shared risk – a factor that smaller technology companies and subcontractors may not have had to consider before.

So federal policy and budget drivers are having a real effect on how government agencies will fulfill critical mission initiatives, and how the contracting community must adapt. Next Wednesday, we’ll look at some general ways technology can assist in meeting mission critical requirements for 2012 and beyond.